Africa, the Pulse for MSME’s – Report 2024

By Deepa Srivastava --
Wednesday, 15 May, 2024

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of Africa’s economy, accounting for the majority of businesses and employment across the continent. Recognizing their vital role in driving economic growth and job creation, we foresee emerging trends and changes over time while also introducing new themes, such as the impact of AI and the potential of the African Continental Free Trade Area (AfCFTA).

As we unleash the opportunities to collaborate in African markets including Ethiopia, Kenya, Nigeria and South Africa alongside exploring the key building blocks in the region, opportunities to collaborate and recommendations. We paint a picture of the MSME landscape, highlighting both progress and persistent economic hurdles and currency devaluation inspite of India providing significant development cooperation to Africa.

Key Insights:

Business Environment in Flux: After a period of recovery from the COVID-19 pandemic, the business environment has taken a turn for the worse, with 65% of MSMEs reporting a deterioration compared to the previous year. Inflation (68%), volatile exchange rates (41%), and political uncertainty (39%) are cited as the primary drivers of this relapse.
Employment Trends: The survey found that 40% of MSMEs have had to lay off staff in the last two years, and 40% are unlikely to hire in the near future.
Digital Transformation: There has been a remarkable increase in the adoption of digital tools, with 65.45% of MSMEs reporting a heightened reliance on technology and online platforms. Investments in AI (29.61%) and website development (50.39%) are high on the agenda.
Marketing Channels: Social media (67%) and search engines (32%) rank online marketing at the top of most MSMEs’ marketing efforts. Most businesses run online marketing in-house, although agencies are resurging from the previous year. Over 60% anticipate increased digital marketing spending in the next 12 months.
Financing Dynamics and Market Expansion: While most MSMEs continue to rely on self-financing, there is a notable shift towards formal financing, with bank loans nearly doubling from 14% in 2023 to 28.5% in 2024. Yet, 31.2% of MSMEs have experienced loan denials.
Continental Expansion: Under the AfCFTA, 24.68% of MSMEs are actively pursuing intra-African expansion, but challenges such as lack of market information (44.94%) and access to capital (43.64%) persist.
Educational Needs and Skill Gaps: MSMEs express a strong desire to enhance their skills, particularly in technology solutions (55.06%), digital marketing (54.03%), and accessing financing (49.35%).

Overseeing the reports we feel there has to be continued efforts to support MSMEs, particularly those focusing on sustainability (besides retail, hospitality and agriculture) through policies and programs that encourage cross-border collaboration and facilitate access to resources and markets. Additionally, there is a need for awareness in MSMEs to adapt and innovate in response to changing market demands and opportunities.

It was also noted that the importance of circular and sustainable products is gaining momentum, with a growing demand for renewable energy, e-commerce, and sustainable agriculture. MSMEs that focus on circular and sustainable products can access specific support services, including funding, training, and access to networks and partnerships focused on sustainability.

Although, India-Africa development cooperation is conceived in a unique three-tiered pattern, encompassing bilateral, regional and pan-African cooperation. The regional commissions in Africa, such as ECOWAS, COMESA and SADC, are active participants in India-Africa cooperation. This was made to forge closer business ties and bring prosperity to the business entities in India and Africa and leverage the expertise of both sides to promote investment, facilitate skill development and technology transfer.

Moreover, AfCFTA presents a substantial opportunity for Indian companies to expand their market reach and diversify their investment portfolios in Africa. Moreso, Indian businesses can capitalize on the preferential access to the African market and participate in regional value chains, unlocking immense growth potential between the two regions and India has greatly stepped up its cooperation and commitment to the African continent.

Africa, the Pulse for MSME’s – Report 2024. Micro, Small, and Medium Enterprises (MSMEs) are the backbone of Africa’s economy, accounting for the majority of businesses and employment across the continent. Recognizing their vital role in driving economic growth and job creation, we foresee emerging trends and changes over time while also introducing new themes, such as the impact of AI and the potential of the African Continental Free Trade Area (AfCFTA).

As we unleash the opportunities to collaborate in African markets including Ethiopia, Kenya, Nigeria and South Africa alongside exploring the key building blocks in the region, opportunities to collaborate and recommendations. We paint a picture of the MSME landscape, highlighting both progress and persistent economic hurdles and currency devaluation inspite of India providing significant development cooperation to Africa.

Key Insights:

<ul>
 <li>Business Environment in Flux: After a period of recovery from the COVID-19 pandemic, the business environment has taken a turn for the worse, with 65% of MSMEs reporting a deterioration compared to the previous year. Inflation (68%), volatile exchange rates (41%), and political uncertainty (39%) are cited as the primary drivers of this relapse.</li>
 <li>Employment Trends: The survey found that 40% of MSMEs have had to lay off staff in the last two years, and 40% are unlikely to hire in the near future.</li>
 <li>Digital Transformation: There has been a remarkable increase in the adoption of digital tools, with 65.45% of MSMEs reporting a heightened reliance on technology and online platforms. Investments in AI (29.61%) and website development (50.39%) are high on the agenda.</li>
 <li>Marketing Channels: Social media (67%) and search engines (32%) rank online marketing at the top of most MSMEs’ marketing efforts. Most businesses run online marketing in-house, although agencies are resurging from the previous year. Over 60% anticipate increased digital marketing spending in the next 12 months.</li>
 <li>Financing Dynamics and Market Expansion: While most MSMEs continue to rely on self-financing, there is a notable shift towards formal financing, with bank loans nearly doubling from 14% in 2023 to 28.5% in 2024. Yet, 31.2% of MSMEs have experienced loan denials.</li>
 <li>Continental Expansion: Under the AfCFTA, 24.68% of MSMEs are actively pursuing intra-African expansion, but challenges such as lack of market information (44.94%) and access to capital (43.64%) persist.</li>
 <li>Educational Needs and Skill Gaps: MSMEs express a strong desire to enhance their skills, particularly in technology solutions (55.06%), digital marketing (54.03%), and accessing financing (49.35%).</li>
</ul>

Overseeing the reports we feel there has to be continued efforts to support MSMEs, particularly those focusing on sustainability (besides retail, hospitality and agriculture) through policies and programs that encourage cross-border collaboration and facilitate access to resources and markets. Additionally, there is a need for awareness in MSMEs to adapt and innovate in response to changing market demands and opportunities.

It was also noted that the importance of circular and sustainable products is gaining momentum, with a growing demand for renewable energy, e-commerce, and sustainable agriculture. MSMEs that focus on circular and sustainable products can access specific support services, including funding, training, and access to networks and partnerships focused on sustainability.

Although, India-Africa development cooperation is conceived in a unique three-tiered pattern, encompassing bilateral, regional and pan-African cooperation. The regional commissions in Africa, such as ECOWAS, COMESA and SADC, are active participants in India-Africa cooperation. This was made to forge closer business ties and bring prosperity to the business entities in India and Africa and leverage the expertise of both sides to promote investment, facilitate skill development and technology transfer.

Moreover, AfCFTA presents a substantial opportunity for Indian companies to expand their market reach and diversify their investment portfolios in Africa. Moreso, Indian businesses can capitalize on the preferential access to the African market and participate in regional value chains, unlocking immense growth potential between the two regions and India has greatly stepped up its cooperation and commitment to the African continent.